Landlord Lease Renegotiation

Saving the golden goose.

Let’s say you are a proud owner of a strip center with a customer-magnet of an anchor tenant. That’s right, it’s a Starbucks. For years this tenant has been paying their rent on time, executing on all of their obligations and benefiting the rest of your center with a steady flow of shoppers. Suddenly your golden goose becomes a waking nightmare – you get a phone call: “lower the rent or else”.  What did just happen? Well, your very lucrative tenant just decided to get a better deal on the rent. Armed with a slew of attorneys on their payroll, the tenant decided to flex their muscles and show you where the balance of power lies. That’s right, if the big boys don’t get what they want, they can move a block down the street. You, on the other hand, would not only loose months of rent and your investment in tenant improvements, but would also suffer a drop in property values.

It happened on every retail corner in 2009 and it has been a dirty tactic ever since. It’s not just the heavyweight coffee shops, any franchise, with or without a good Standard & Poor’s rating could make the landlord a hostage of their own property. It is especially common when economy and the business suffer in a downturn. When choosing between the three major expenses categories – 1) cost of labor, 2) cost structure of the product or 3) lease payments, lease payments are the easy choice to cut down on. What about a big box store like Sears filing for bankruptcy? They could be paying their full lease amount, but instead of making good on their 10-years remaining term, they want to leave this year. Will your location be the first one to close its doors or the last one? Can the deal be made to minimize the impact on your specific location?

A lease renegotiation is an extremely stressful, uncomfortable situation  for the landlord. As a person, directly impacted by the outcome of the negotiations, it is recommended for the landlord to have a heavy-weight representative of his or her own on the front lines. Here’s what a skilled negotiator and an attorney would do for you:

1). Help de-escalate the situation, while keeping the lines of communication open.

2). Find ways to preserve landlord’s revenue and long-term property value, while satisfying tenants’ demands in ways that are agreeable for both sides.

3). Provide regular updates and insights into the current state of negotiations.

Whether it’s Starbucks, Sears or just a small State Farm office, your job as a landlord is to protect your revenue and your asset. An experienced real estate attorney will help you to not only defend yourself and your income, but also to keep the tenant without giving away the farm. It is always less expensive to reach the agreement with the current tenant, than to fund the improvements and the broker fees of finding a new one.

There is an immense value in having a third neutral party negotiate your position for you. Mr. Moschetti offers the required level of expertise in both tenant negotiations and diplomacy to move the ball back into the landlord’s corner without causing any permanent damage to the landlord’s bottom line.

Contact Mr. Moschetti today and find the solution to your tenant issues.